Benefit of Double Tax Avoidance Agreement (DTAA)

Non Resident Indians (NRI) often earn an income from some work they do in India or assets they own in India. The income from these sources are often subject to tax not only in the country of their residence but also in India. But, NRIs don’t always have to pay tax for the same income in both countries. They can use the Double Tax Avoidance Agreement (DTAA) to avoid taxation in two countries.

India has approximately 128 DTAAs in force right now. These agreements are with major nations of the world where a large number of Indians reside and work. NRIs can take advantage of the DTAA and not pay taxes twice on income from:

  • Services provided in India
  • Salary received in India
  • House property situated in India
  • Capital gains on transfer of assets in India
  • Fixed deposits in India
  • Savings bank account in India

If these incomes are taxable in your country of residence as well, you can take benefit of DTAA and pay tax only once.

DTAA Methods

There are two methods to avoid double taxation under DTAA–tax credit and exemption. In the first method, tax relief can be claimed in the county of residence and in the second method, exemptions can be claimed in either one of the two countries. Not sure which one of the two methods is best suited for you? Get a clearTax tax expert to help you out.

The benefit of DTAA can be claimed by individuals and companies who reside outside India as well as Indian residents who earn an income from services provided outside India.

To learn more about taxation for NRIs, visit this comprehensive guide on cleartax.in.

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